Analysis & Opinion

NEW YORK, July 18 (Reuters) - Moody's Investors Service on
Thursday raised the U.S. sovereign outlook to stable from
negative and affirmed the country's triple-A rating, citing
steady growth despite reduced government spending.

The rating agency's move eased the threat of a cut to the
world's biggest economy.

Moody's said the federal government's debt trajectory is on
track with criteria the rating agency previously laid out, even
without further budget measures from Washington.

The economy is growing moderately, but it is still
"progressing at a faster rate compared with several Aaa peers
and has demonstrated a degree of resilience to major reductions
in the growth of government spending," Moody's said in a
statement.

The U.S. budget outlook has brightened in recent months,
alleviating some of the pressure on policymakers for more fiscal
compromises.

On May 14, the non-partisan Congressional Budget Office said
the U.S. federal budget deficit is shrinking at a faster pace
than expected, and forecast this fiscal year would end with the
smallest shortfall since 2008.

"We feel that we have enough information on the debt
trajectory at this point to make a conclusion even without
information on any possible further actions in Washington,"
said Steven Hess, Moody's lead U.S. sovereign credit analyst.

Even the possibility of further debate on raising the U.S.
debt ceiling this year - allowing the government to keep
borrowing money - is unlikely to hurt the rating, Hess said.

"We think that they will raise the debt ceiling, as they
always have in the past," he said. "But even if there's some
delay, we're not too concerned about that affecting the
government's ability to service its debt."

Analysts said the affirmation means the U.S. sovereign
rating could be safer now for years to come.

"We are still running sizable deficits but they are not
getting worse," said Guy LeBas, chief fixed-income strategist at
Janney Montgomery Scott in Philadelphia.

"Barring a nuclear event or the re-emergence of the debt
ceiling problem, this drastically reduces the chance of a U.S.
downgrade in the next couple of years," he added.

Last month Fitch also affirmed the U.S. sovereign AAA
rating. But that agency kept a negative outlook, saying
still-elevated debt levels leave the country vulnerable to
shocks without more deficit reduction.

Standard & Poor's rates the country AA-plus, with a stable
outlook. S&P cut the rating in August 2011 after a bruising
round of debt ceiling debates in Washington raised fears of
political dysfunction.

In addition, Moody's affirmed the Aaa senior ratings of
Fannie Mae, Freddie Mac, the Federal Home
Loan Banks and the Federal Farm Credit Banks, which the agency
considers to be directly linked to the rating of the U.S.
government.

While the stable outlook means the agency is unlikely to cut
the U.S. sovereign rating in the medium term, Moody's noted that
could change in the future.

"Without further fiscal consolidation efforts, government
deficits are anticipated to increase once again over the longer
term," the Moody's statement said.

The outlook covers the next couple years or so, Hess said.
After that, he added, "a triple-A rating is not guaranteed
forever."